Standard Chartered warns income growth to miss target
By Sean Farrell
Date: Thursday 27 Feb 2020
(Sharecast News) - Standard Chartered warned income growth would be lower than its target in 2020 as the Asia-focused bank reported an 8% increase in 2019 underlying profit.
The FTSE 100 lender said low interest rates, slower global growth, a weaker Hong Kong economy and the coronavirus outbreak would push income growth below its 5-7% medium-term goal in 2020. The bank will not achieve its goal of a 10% return on tangible equity by 2021, it added.
Underlying pretax profit for the year to the end of December rose to $4.2bn (£3.3bn) from $3.9bn a year earlier as income increased 2% to $15.3bn. Profit was lower than analysts' average forecast of $4.3bn. Statutory pretax profit increased 46% to $3.7bn as the bank incurred lower regulatory charges and income at constant currency rose 4%.
Profit missed forecasts because of lower revenue and higher bad debts than expected. Credit impairments rose by $166m to $906m.
Standard Chartered declared a final dividend of 20 cents a share taking the annual payout to 27 cents a share - up 29% on 2018. It also announced a $0.5bn share buyback to start soon.
Chief Executive Bill Winters has been trying to improve shareholder returns by cutting costs, tapping growing wealth in emerging markets and improving the bank's digital services. The bank's return on tangible equity rose 130 basis points to 6.4% in 2019 but remained well short of the bank's 10% target.
Winters said the external environment was tough, including low interest rates that squeeze lending margins, slowing global growth, trade tensions between the US and China, a recession in Hong Kong and the unpredictable coronavirus outbreak.
Standard Chartered's biggest market is Hong Kong and it has large operations in mainland China and South Korea. The bank did not give an estimate for the impact of the coronavirus but said it was affecting many of its key markets.
"While ensuring appropriate support of clients, we have taken measures to ensure the ongoing effectiveness of our risk management, maintaining a strong, diversified and resilient portfolio and ensuring that areas of growth are well controlled and sustainable," the bank said.
Standard Chartered reported its results with markets gripped by fears about the impact of coronavirus on the world economy and company earnings. Its shares fell 4% to 568p at 08:54 GMT.
Richard Hunter, head of markets at Interactive Investor, said the outlook was "uninspiring" though some of the problems were outside the bank's control.
"The very focus on Asia which may yet prove to be of long-term benefit is biting the bank in the nearer term," Hunter said. "The group is likely to strengthen its focus on costs, particularly in light of the expected slowdown in income growth."
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